Demand for wireless communication services in Russia has grown rapidly over the last ten years. On December 31, 2007, overall wireless telecommunications penetration in Russia stood at 119% (or 173 million subscribers) versus 105% (or 152 million subscribers) at the close of 2006, according to AC&M-Consulting.
Key growth factors include
» A rapidly growing economy
» Rising disposable incomes and a growing middle class
» Relatively low fixed-line penetration
» Prevalence of multi SIM card usage
In recent years competition has evolved to exist primarily between MTS and two other major players, each of which provides significant coverage throughout Russia. In addition, MTS competes with local GSM, D-AMPS and CDMA operators in several Russian regions.
Competition in the market is based upon:
» Local tariff prices
» Network coverage and quality
» Brand perception
» Level of customer service provided
» Roaming and international tariffs
» Value-added services
The Ukrainian wireless telecommunications market has grown rapidly in recent years largely due to:
» Broader economic recovery in Ukraine
» Changes in ownership of the two major operators
» The introduction of Calling Party Pays (CPP) billing arrangements
» Increasing competition with the entry of new players
According to public information obtained by Ukrainian mobile operators, overall wireless penetration in Ukraine increased from 104% to 120%, or approximately 55.6 million subscribers, in 2007. MTS Ukraine (formerly UMC) is one of the largest wireless providers in the country, with a 36.0% market share and representing 38.8% of revenues in the country. (Penetration data according to AC&M-Consulting.)
Competition in the market is primarily based on:
» Service offers
» Network quality
» Brand perception
Low penetration rates characterize the wireless telecommunications market in Uzbekistan giving MTS the opportunity to develop this market in the coming years. According to the Company’s estimates, in 2007, overall wireless penetration in Uzbekistan increased to 22% from 10%.
MTS is the number one provider of mobile telephone services in the country, with approximately 2.8 million subscribers accounting for nearly 48% of the Uzbek market.
In Turkmenistan, MTS continues to dominate the market, increasing its subscriber base by 94% to 356,260 at the close of 2007 versus 183,788 at the end of 2006. MTS thereby increased its market share by around five percentage points, with an 88% share of the total market in 2007.
Penetration in Turkmenistan is still very low, as it grew from 3.2% in 2006 to 7.4% in 2007 according to company estimates, but the country’s economic growth and low fixed-line penetration give MTS every indication that Turkmenistan will continue to increase its visibility in the Group results.
In September 2007, MTS acquired an 80% stake in K-Telekom, a mobile operator in Armenia operating under the Viva-Cell brand and offering wireless services using GSM 900 and GSM 1800 technologies throughout the territory of Armenia. As of December 31, 2007, Viva-Cell had 1.4 million subscribers and a 73.9% market share according to AC&M-Consulting. At the end of 2007, the overall wireless penetration in Armenia was 58%, or approximately 1.9 million subscribers, according to AC&M-Consulting data.
In October 2007, K-Telekom was allocated frequencies valid for 10 years to offer 3G services in the UMTS standard on the entire territory of Armenia.